Bulletin

A new economic ground plan in China

CaixinOnline

BEIJING (Caixin Online) — Policymakers wrapped up the Central Economic Work Conference on Dec. 16, pledging to take both short- and long-term measures to ensure stable growth in the future.

They also reiterated a pledge to continue socialist market reforms with an approach that will demand even greater political courage and wisdom. Importantly, the leadership promised — for the first time — clearly-stated plans and a road map for each area of reform.

These pledges are welcome. For years, empty talk about reform has raised doubts about the government’s sincerity and capability and dented its credibility.

While the economy was growing rapidly, reform seemed less urgent. But now the nation faces rising social conflict, environmental costs and concerns about unbalanced, uncoordinated and unsustainable economic growth, due mainly to institutional constraints.

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Excessive government intervention has distorted prices and skewed market behavior. The inclination to pump financial resources in state-owned enterprises stifled innovative private enterprises and rendered many of them unprofitable. China’s economy is struggling to create a new powerhouse for growth.

Promising the people better communication on reform can surely rekindle public trust in their government. Major structural reforms are widely expected to be tabled until the third plenum of the 18th Central Committee next autumn.

Embarking on a top-level overhaul of planning for reform doesn’t mean we should do nothing now. While major reforms require comprehensive planning, basic reforms — those that have been agreed upon and whose directions are set — can be implemented by the party’s rank-and-file.

At the same time, policies and measures that are obviously not in line with the country’s economic approach should be scrapped. A clear direction must be set out to change the overall environment and momentum for reform.

Reform of government interference in the market is critical. Throughout two decades of reforms, the Communist Party has stressed against direct intervention in enterprises’ operations and production. But government interference remains a serious concern.

Most notable is government meddling in the day-to-day management of state enterprises. Market regulation and consumer protection is vulnerable, whereas public services are still inadequate, and income distribution is unfair. In such circumstances, reform resolutions reached in the past should be implemented without delay.

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The National Development and Reform Work Conference, held after the Central Economic Work Conference, once again emphasized the importance of price reform, particularly of resources.

Similar motions have been raised for years to no avail, mainly due to resistance from officials and state-owned enterprises that enjoy monopolies or restricted competition. In fact, such reform programs that have been put on hold are ready to be rolled out.

This year’s economic work conference defined “public investment” as areas that lay the foundation for long-term public benefits and livelihood and don’t create redundant infrastructure.

Similar statements were made in the third plenum of the 14th Central Committee nearly 20 years ago. But government departments have for years reaped lucrative returns by competing in public tenders while holding control of land, capital and other resources.

Those hoping for another round of government stimulus to come from the next administration should lower their expectations.

The government has introduced too many controls on the economy, citing “macroeconomic regulation” for what is really micro-intervention. This must change.

Let’s take investment management as an example: the current system is still approval-driven despite rounds of streamlining approval procedures and improved record-keeping. Yet, to get investment projects off the ground still requires hundreds of “stamping” or approval procedures. Such low efficiency also creates opportunities for rent-seeking and corruption.

Fiscal spending on public services has risen in recent years, but is far from adequate. Social security accounts have been idle with no significant gains. The hukou household registration system still bars migrant workers from enjoying public services.

All these pose a huge social risk that might severely limit the extent of urbanization, which is crucial to boosting domestic demand. The effectiveness of policies on people’s livelihoods must be reviewed and factored into national planning.

China’s economic growth should eventually be driven domestically. As the main powerhouse of innovation, private enterprises must be given fairer access to loans and resources, and entry to high-yield industries.

The government must legally and openly deal with cases of infringement of property rights of private enterprises, such as those in Chongqing. Only by doing so can they rebuild the confidence of entrepreneurs, whose ingenuity and long-term survival always benefit the population.

The list may be endless. But it’s vital to put such words into action to make our nation strong. Doing a good job today is preparing for a better tomorrow.

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